China Economy Forum

[TaiShang]

Youku to invest US$1.6b in user-generated content
China Daily, August 7, 2015

Youku Tudou Inc, the Chinese online streaming site, is investing 10 billion yuan ( $1.6 billion) into being able to stream more and better user-generated content over the next three years.

As technological advancements empower more users to produce videos, the Beijing-based company's Chief Executive Office Gu Yongqiang said the future of the entertainment industry will center around what he called "we media", meaning that most content will come from users rather than established organizations.

To tap into this growing trend, Gu said the company will roll out plans to help grow 100 'we media' brands, each valued at more than 100 million yuan, and 10,000 others whose monthly revenues will exceed 10,000 yuan.

Liu Cuiping, an analyst at entertainment market researcher EntGroup Inc, described Youku's hefty new investment as a well-calculated decision.

"High-quality, user-generated content is an important asset to attract audiences who are turning to online platforms for entertainment," Liu said.

According to the China Internet Network Information Center, by the end of the June, there were 428 million online video viewers across the country, with mobile viewers accounting for 76.8 percent of those.

"Compared with buying copyrights of existing TV shows and films, user-generated content is less expensive, but more importantly it can be exclusively targeted at online audiences and is produced in a fashion that online viewers find more appealing," Liu said.

The Youku plan comes as an increasing number of Chinese TV broadcasters start to produce talkshows, TV dramas, and reality shows for video sites, and these are being seen as an increasingly important part of user-generated content.

"Programs developed by these professional users are becoming more popular and that will be the focus of Youku's investments," Liu said.

More than half of Youku's content is currently user-generated, but 10 of its more popular professional-user programs are already valued at more than 100 million yuan.

Gu said the popularity of such programs has raked in the company around the same amount in revenue.

"In the next three years, revenues from subscribed users and user-generated content will surpass advertising income," he said.

Youku's main industry rivals are also pouring cash into the sector to catch up with it.

Tencent Holdings Ltd, Sohu.com Inc and Leshi Internet Information & Technology Corp, have all invested heavily so far, and EntGroup estimates that all streaming sites in China are likely to spend some 2 billion yuan this year on producing self-made content, teaming up with professional program makers.

 

[cirr]

China boosting wind energy harvest

Reporter: Ning Hong 丨 CCTV.com

08-06-2015 12:58 BJT

In its continuing bid to boost green energy development, China has poured investment into a major wind corridor in North China near Beijing. And as Ning Hong reports, more is on the way to unleash its full potential.

Gusts from Inner Mongolia blow across Zhangjiakou throughout the year, making it the top wind power base in China. But after a period of fast expansion, the industry is now in need of a second wind.

"Since 2008, there have been more limits on wind power output for power stations. For instance, for a two hundred kilowatt wind power station, the output is only fifty kilowatts, that means only a quarter of the power generated can be used," said Zhang Hua, Plant manager of Manjing Wind Power Station.

This is an ideal place to harvest wind power. And at the turn of the millennium, there was a rush to build wind power stations. However, it hit a bottle-neck with basic infrastructure and power grid construction unable to keep pace. That's what people are now trying to change.

Bigger and better wind turbines were introduced to increase efficiency and reduce maintenance costs at power stations. And the State Grid has plans to build three more power substations and four transmission lines to get the power flowing again.

"We now have three wind power stations here. If you take our largest one, for example, it will double output when it is running at full capacity," Zhang said.

And according to documents released by Zhangjiakou officials, over 50 more wind development projects are in the works, that could bring the total capacity to over four thousand megawatts.

China boosting wind energy harvest - CCTV News - CCTV.com English

 

[TaiShang]

 

[Jlaw]

Japan is in more of crisis than any other countries

• Japan makes up only 6.18% of total economic production, but has amounted 19.99% of global debt.

 

[Bussard Ramjet]

Japan is in more of crisis than any other countries

• Japan makes up only 6.18% of total economic production, but has amounted 19.99% of global debt.

This is only government debt, not private debt. China has a lot of debt that is private and corporate owned.

 

[Jlaw]

This is only government debt, not private debt. China has a lot of debt that is private and corporate owned.

What do you think about India private debt? Will Mr. Modi make India a superpower by the end of his term? If China stops growing at 7% will India grow at 14%?

India’s Debt Pileup Complicates Growth Plans - WSJ

 

[Hypersonicmissiles]

What do you think about India private debt? Will Mr. Modi make India a superpower by the end of his term? If China stops growing at 7% will India grow at 14%?

India’s Debt Pileup Complicates Growth Plans - WSJ

That's just the official numbers, the real numbers are far worse.

 

[zeronet]

China's debt is okay. The majority of China's debt is on building of infrastructure, for example, the whole high speed rail system alone in China has accumulated $500 billion debt (should be under corporate debt category I believe) up to today and the pileup won't stop any time soon. But with the land price soaring these yrs, you find that this investment or debt was the smartest investment you can make at that time. Now the value of land alone is more than 3x higher, let alone the benefits on social, industrial upgrade, job creating.....Having debt is not a horrible thing itself, it only depends on how to spend it. Usually Chinese do not loan to buy anything except house maybe, even car loan percentage is no more than 5% in China, most people just pay cash to buy car. I don't say that every penny of debt was spent wisely, many stupid spendings always happen, but it was real that China didn't use public debt to fill the bottomless holes of social welfare, pension, or consumption, most of the debt is for investment.

 

[Hypersonicmissiles]

China better accelerate its reforms because the reform speed has not kept pace with the changing economy. Local governments are not implementing the reforms that are approved by the central government.

The main problem with the Chinese economy is the lack of financial reform.
If the state council don't allow private companies to get access to lower cost financing, you will see problems. Private banks must be allowed to thrive and the bond market must be developed quickly to give companies access to financing.

China's state-sector is sucking up most of the funds and not being very productive.

China should also remove the property restrictions and automobile restrictions. Property market downturn is hurting demand for big sectors like steel, glass, aluminium, cement, furniture, etc. These are big contributors to the Chinese economy but the property downturn has hurt these industries and in turn damaged the overall economy.

Too much government interference in the market have distorted so many sectors and the government is doing one mistake to solve an earlier mistake.

 

[Götterdämmerung]

China better accelerate its reforms because the reform speed has not kept pace with the changing economy. Local governments are not implementing the reforms that are approved by the central government.

The main problem with the Chinese economy is the lack of financial reform.
If the state council don't allow private companies to get access to lower cost financing, you will see problems. Private banks must be allowed to thrive and the bond market must be developed quickly to give companies access to financing.

China's state-sector is sucking up most of the funds and not being very productive.

China should also remove the property restrictions and automobile restrictions. Property market downturn is hurting demand for big sectors like steel, glass, aluminium, cement, furniture, etc. These are big contributors to the Chinese economy but the property downturn has hurt these industries and in turn damaged the overall economy.

Too much government interference in the market have distorted so many sectors and the government is doing one mistake to solve an earlier mistake.

Yeah, lets privatise everything, including the government. That would make the Chinese Gov. Inc Ltd. the most efficient government in the world.

 

[TaiShang]

Nine Things You Need to Know about China's New ForeignExchange Policy
August 13, 2015

BEIJING, Aug. 12-- When China's central bank unexpectedly adjusted its yuan central parity system, it triggered the currency's biggest decline for decades.

So, what exactly happened?

On Tuesday, the People's Bank of China (PBOC) changed the way it calculated the yuan central parity rate, to close the gap between the rate and the actual trading rate on the money markets.

From Tuesday, the central parity rate has taken into account the previous day's inter-bank market closing rate, supply and demand in the market and price movements of other major currencies.

Ma Jun, a central bank economist, described the change to the way the central parity rate is calculated as a "one-off" technical correction that should not be seen as the beginning of a devaluation trend.

Just what is the central parity rate?

Each trading day at 9:15 a.m. Beijing time, the central parity rates of the yuan are announced against 11 major currencies including the euro, sterling, U.S. dollar and yen.The rates are determined by a weighted average of pre-opening prices offered by market makers. When the inter-bank FX market opens 15 minutes later, trading may only take place within 2 percent of the rate.

Why now?

The U.S. dollar is strong and a sharp appreciation in the real yuan rate has hit China's exports hard. The figures for July slumped by 8 percent. Furthermore, the central parity rate has gradually deviated from the market rate "by a large amount and for a long duration," according to the PBOC, which has undermined "the authority and the benchmark status" of the central parity system.

How did markets react?

On Wednesday, the yuan declined sharply for the second day in a row, leading to a heavy sell-off in regional currencies and raising concern worldwide that volatility will become a drag on global economic growth.

Asian stocks fell.

The yuan is expected to remain weak and volatile in the near term.

Is this a deliberate move to stimulate exports?

Tuesday's move is regarded as another step towards allowing market forces to determine the value of the yuan, but is probably not enough to make much difference to either exporters or China's trade partners.

HSBC say the move does not mean that China has begun to purposely devalue the yuan.

"In an environment of soft global recovery, the benefits of beggar-thy-neighborcompetitive devaluation are neither clear nor easy to reap," was the bank's analysis of the situation.

How will this affect the Chinese people?

A weaker yuan makes imported products more expensive and foreign travel more costly.

The Chinese are just getting used to their new prosperity. Shopping has become very important to them, especially shopping for imported goods. Foreign travel for its own sake, but more specifically for shopping, is central to the aspirations of China's new wealthy classes. Those who plan to study abroad, particularly at American schools, will also feel the pinch.

Is all this good or bad for the yuan's chances of a quick inclusion in SDR?

The International Monetary Fund (IMF) has welcomed the reform, which will certainly raise the prospects for the yuan becoming part of the IMF special drawing rights (SDR)currency basket sooner rather than later.

The change does not directly affect the push for SDR inclusion, but an IMF spokesmansaid on Wednesday that "a more market-determined exchange rate would facilitate SDRoperations in case the yuan was included in the currency basket."

What's the risk?

The depreciation might trigger capital flight, dealing a blow to the stability of China'sfinancial system. Bloomberg economists Fielding Chen and Tom Orlik reckon that a 1-percent depreciation against the dollar will suck 40 billion U.S. dollars out of China. While40 billion U.S. dollars is certainly not chicken feed, with massive foreign exchangereserves, substantial bank deposits and a controlled capital account, China is well set todeal with such an eventuality.

So, what next?

The PBOC has promised more FX reform along the lines of "market- orientation" andopening up the FX market. More foreign entities are being allowed to participate inChina's financial markets, and the onshore-offshore yuan exchange rate will gradually beunified.

 

[Jlaw]

China's debt is okay. The majority of China's debt is on building of infrastructure, for example, the whole high speed rail system alone in China has accumulated $500 billion debt (should be under corporate debt category I believe) up to today and the pileup won't stop any time soon. But with the land price soaring these yrs, you find that this investment or debt was the smartest investment you can make at that time. Now the value of land alone is more than 3x higher, let alone the benefits on social, industrial upgrade, job creating.....Having debt is not a horrible thing itself, it only depends on how to spend it. Usually Chinese do not loan to buy anything except house maybe, even car loan percentage is no more than 5% in China, most people just pay cash to buy car. I don't say that every penny of debt was spent wisely, many stupid spendings always happen, but it was real that China didn't use public debt to fill the bottomless holes of social welfare, pension, or consumption, most of the debt is for investment.

infrastructure debt is good debt. welfare for lazy asses are bad debt that I'm glad we do not have like the west.

 

[TaiShang]

China’s foreign reserves hit new low, but no crisis

China’s central bank says the country’s foreign reserves slipped to a two-year low at the end of July, marking 17 months of continuous decline.

China’s foreign exchange reserves in July dropped by 342 billion US dollars from last year's historic high of 3.99 trillion, a reversal of the long-term growth of China's foreign reserves.

Experts, however, are saying this presents no danger, and in fact reflects well on the country's economic development. In fact, China's trade surplus was 305 billion US dollars in the first seven months of 2015, more than twice the previous year's figure.

According to Lin Caiyi, Chief Economist of Guotai Junan Securities, the prospect of a stronger US dollar is another factor in the increasing willingness to invest in dollar-denominated assets or to hold dollars as a reserve currency.

Another factor in the reserves' decline is that in the first half of the year, the government took 93 billion US dollars out of foreign exchange reserves and put it into China Development Bank and the Export-Import Bank of China, where it can support China's Belt and Road Initiatives.

The downward trend of the forex reserves will continue, according to Liu Xuezhi, senior analyst at Bank of Communications. He says China's continuing economic reforms in the coming years will further bolster overseas investments.

“It is related to the developments of the real economy. Overseas investments like ‘one belt one road initiative’, Chinese enterprises' expansion, all can cause capital outflows and bring the forex reserves down. So capital outflow is connected to economic transformation, and does not necessarily have much of a negative impact,” said Liu.

Despite the decline, China still has the largest foreign exchange reserves in the world. Premier Li Keqiang once said that a large sum of forex reserve in fact could be a burden on the country, because it would pump liquidity into the market and lead to inflation.

 

[TaiShang]

Gold reserves swell as nation diversifies forex holdings
August 15, 2015

China increased its gold reserves to 53.93 million troy ounces by the end of July from 53.32 million ounces a month earlier, according to data released by the central bank.

The world's biggest bullion consumer last month ended six years of mystery over how much gold it is hoarding, revealing a 57 percent jump in holdings since 2009 and overtaking Russia to become the country with the fifth-largest stash of the metal.

Bullion remains a large part of many central banks' reserves, decades after they stopped using it to back paper money. Stockpiles of the metal help China to diversify its foreign-exchange holdings as the world's second-largest economy seeks to raise the international profile of its own currency.

"China's central bank will continue to buy," said Gnanasekar Thiagarajan, director of Commtrendz Risk Management Services Ltd in Mumbai.

"The central bank is diversifying its reserves and some amount of bargain hunting has taken place. The PBOC is trying to make the renminbi into an international currency," he said, referring to the People's Bank of China and the country's currency.

The central bank said on July 17 that it had boosted bullion assets to 53.32 million ounces, or about 1,658 metric tons, up from 1,054 tons in 2009, when it last updated the figures.

The United States has the biggest reserves at 8,133.5 tons, data from the World Gold Council show.

Nations have expanded holdings in the past few years, a reversal from two decades of selling since the late 1980s. Many central banks remain exposed to a small number of key reserve currencies and look to gold as a hedge against volatile currency movements, according to the World Gold Council.

Countries are likely to buy 400 tons to 500 tons of the metal this year, the council said in May. Russia more than tripled its hoard since 2005.

Gold for immediate delivery added 0.2 percent to $1,116.75 an ounce by 3:56 pm in Singapore on Friday.

 

[F-22Raptor]

China’s economy is growing more slowly than official data suggests and below potential, a Bloomberg survey indicates, helping explain why policy makers have stepped up stimulus and the move to boost exports with a weaker yuan.

The economy expanded 6.3 percent in the first half, compared to the officially reported 7 percent, according to the median estimate of 11 economists surveyed last week. For the full year, a 6.6 percent pace was the median forecast of respondents, who were asked to nominate real growth rates, not what they expect the official data to show. They estimate the economy’s potential expansion pace for this year is 7 percent.

The gap between the potential and estimated real rate of expansion highlights a cyclical slowdown that the government is trying to plug with looser monetary policy, increased fiscal support, and a weaker currency. Bloomberg’s monthly gross domestic product tracker has pegged growth below 7 percent all year, clocking a 6.6 percent pace in July.

“The actions of the government and central bank so far this year do indicate a certain amount of concern over economic growth,” said Patrick Franke, an economist at German savings bank Helaba in Frankfurt. “That would be easier to understand if they were aware that underlying/true growth was actually below, and not in line with, the 7 percent target.”

The recent flurry of measures to prop up growth in part are “extra insurance against an unwanted downshift in demand growth” he said. Signs indicating growth is lower than officially stated include power generation and weak demand for imports, said Franke.

The survey was conducted between August 10 and 13 on the basis that respondents’ forecasts would remain anonymous.

“Potential growth is on a slowing trend because of the slowing population growth and capital formation and also productivity growth,” said Chang Jian, chief China economist at Barclays Plc in Hong Kong.

Even at the government’s targeted pace of 7 percent for this year, the economy is heading for its slowest annual expansion in a quarter of a century. Producer prices slumped 5.4 percent last month, credit to the real economy plunged and consumer inflation remains at about half the target of 3 percent this year, suggesting threats to the goal.

China’s Communist government announces growth targets at annual confabs each year in a hangover from its Soviet-inspired past. The accuracy of the nation’s data has been questioned for years, with anomalies including discrepancies between regional and national numbers and inflated trade figures.

Back when Premier Li Keqiang was party secretary of Liaoning province, he said in 2007 that GDP figures were “man-made” and therefore unreliable, according to a diplomatic cable published by WikiLeaks in 2010. Ongoing measures to improve the quality of economic data include a June vow by the National Bureau of Statistics to expand an employment survey that Li says he wants to be “authoritative.”

First-half growth was just 6.2 percent while further deceleration in the second half will see full-year expansion of only 5.8 percent, estimates Wang Shenshen, a senior economist covering China with Okasan Securities Co. in Tokyo.

She peg’s the nation’s growth potential higher -- at about 8.1 percent this year -- but said getting close to that isn’t easy given the nation’s low investment efficiency and policy makers’ determination to deleverage the economy. Stimulus efforts won’t be able to push growth higher and are instead intended to put a floor under the economy, she said.

“If the government wants to push up GDP they know how to do it because the potential is higher,” she said. “But for the past two years the data has shown us that the government doesn’t want to do that.”

China GDP Slower Than Official Data Helps Explain Stimulus Moves - Bloomberg Business